Something has been said by an earlier witness about a provision in the State law of California whereby 3 percent money was made available. I was wondering why they did not avail themselves of this.

Mr. BRYANT. That money is available through the State veterans' home loan program, but is available only for the purchase of single homes which cannot exceed in amount $7,500.

Senator SPARKMAN. And to veterans only?

Mr. BRYANT. That is right.

Senator SPARKMAN. Thank you.

Senator DOUGLAS. Mr. Bryant, I notice on page 4 of your testimony while you do not directly make the charge, the indication seems to be that the FHA authorities in southern California, at least, were somewhat hostile to the idea of cooperative housing.

Mr. BRYANT. I think that is an understatement. Conversations were reported to me by friendly FHA employees that responsible officials state that they would not insure any cooperative in a thousand years. Senator DOUGLAS. Even though in other respects it was sound. Mr. BRYANT. That is right.

Senator DOUGLAS. What is your conclusion, therefore, about the location of the new agency as set up in the bill? Should it be under the Housing and Home Financing Administrator, or would you prefer to have him appointed by the President and confirmed by the Senate?

Mr. BRYANT. Our organizations feel strongly that the program should have a commissioner responsible to the President. If it were directly under the present Housing and Home Finance Agency, there might be the appearance of a program, but there might not be any program.

Senator DOUGLAS. Has it been the general feeling of cooperative housing groups over the country that the attitude of FHA in other localities has been approximately what it has been in California?

Mr. BRYANT. Yes. I mentioned outside of my written testimony that, in this study representing correspondence from 150 cooperatives throughout the country, they all reported exactly the same thing. Endless delay, deliberate obstacles, no desire to cooperate or work out the problems.

Senator DOUGLAS. So you feel that if the administration were as provided in the present draft of the bill, that cooperative housing ventures might not be administered by its friends?

Mr. BRYANT. Yes; I would agree with that. I would feel that whatever program did result would be very probably confined to the very same type of narrow, backward-looking thinking on design, site planning, occupancy policies, and so forth, that local offices of FHA have shown during the last few years.

Senator DOUGLAS. I thought one of the most interesting pieces of testimony which we had before us was a one-page table of estimated costs that Mr. Foley introduced at the time of his testimony, indicating that in his judgment the rental costs for $7,000 housing units could be reduced by approximately $25 a month by using cooperative principles, and during my questioning I tried to push him on a number of elements in these estimates of cost, and I wondered if I might take some of them up with you. First the question of the vacancy.

As I remember it, Mr. Foley said that in commercial housing under section 608, there was an average vacancy allowance added of approximately 7 percent, and upon further cross-examination it developed

that this addition of 7 percent was not the actual vacancy rate but was an accounting charge on the estimate of what the vacancy would be over a long period of time, but that it did enter into the rents of privately rented units. I notice you are a student of real-estate problems in general as well as in cooperative housing problems. I wondered what you thought of that 7-percent rate, and if you would be willing to comment upon the probable vacancy rate in cooperative housing.

Mr. BRYANT. Just before you came in, I went at length into why I thought that cooperatives could cut at least a third off the monthly management and maintenance cost, and specifically I had in mind management projects with less than two-tenths of 1 percent of vacancy loss and one-tenth of 1 percent collection loss. One-half of 1 percent combined collection and vacancy loss would be ample allowance for cooperative projects as compared with the usual between 3 and 5 percent of rental projects, including the experience of the last 2 or 3 years.

Over the last 25 years I think vacancy and collection losses have fallen between 3 and 5 percent.

Senator DOUGLAS. So that you would say the 3-percent allowance which Mr. Foley makes is a very conservative figure?

Mr. BRYANT. Yes.

Senator DOUGLAS. What would you say about the 7-percent charge made in private projects, 7-percent vacancy charge?

Mr. BRYANT. I would say that would be higher than most modern rental projects and would be exceeded only in times of general depression in the highest third of rental apartments.

Senator DOUGLAS. Do you know as a matter of fact what is the practice of course, there is not a 7-percent vacancy rate now. The question is, Is there an accounting charge even though the physical vacancies do not exist?

Mr. BRYANT. Yes; it is calculated in the rent right now.
Senator DOUGLAS. Is that the common practice?

Mr. BRYANT. It is calculated in setting rents on section 608 projects. Of course in private projects, I don't know whether there are any calculations in the new ones, because they simply charge what the market would bear, which would be over 30 percent of the actual cost of the management.

Senator DOUGLAS. I regret I didn't hear your testimony. Perhaps I am repeating. Would you speak about the question of maintenance costs in cooperative projects as compared with others?

Mr. BRYANT. Yes. I would say that the two most important savings would lie in first, that you could do with substantially less management, less management staff because of a certain amount of responsibility upon tenant leaders and developing that leadership, which is a critical problem in its success. I am confident you could cut at least one-third off the management cost. I think with good management it should be possible to cut one-half off the clerical and accounting and management personnel commonly used. The biggest saving, however, would be in tenant maintenance.

No. 1 would be the idea of carrying their own interior painting and decorating. In my book, to be published in a month, I have gone into that in detail, as to how that can be properly handled. Also ground maintenance and where there are individual yards. And then

the policy for charges for breakage. I am confident at least a third can be cut off the maintenance costs and possibly as much as a half. Senator DOUGLAS. Because of giving people an individual interest? Mr. BRYANT. Yes. Both an individual responsibilty and group

morale.

Senator DOUGLAS. So that they will be living in apartments or houses which they feel are theirs instead of being merely tenants.

Mr. BRYANT. It is building the things we like to think of as of the best psychological aspects of home ownership.

Senator DOUGLAS. You remember the saying, "No man would shoulder a gun in defense of a boarding house."

Mr. BRYANT. I think that is a problem for both public housing and private rental housing, to give tenants a greater feeling of participation and responsibility.

Senator DOUGLAS. You think the cooperative type of housing could develop a much greater state of tenant response than public housing? Mr. BRYANT. Yes. I would like to see public housing, develop it too.

Senator DOUGLAS. In the nature of things you tend to love that which is in part your own rather than something which is not your own; therefore, wouldn't you expect to excite more cooperation in cooperative projects than one in which they merely live in apartments furnished to them by the State.

Mr. BRYANT. Yes; other things being equal, the cooperative is a strong dynamic force for building that feeling.

Senator DOUGLAS. Do you find that the tenants are willing to cut the grass or do they always leave it to somebody else? I mean the members. Are the members willing to take their turn at cutting the grass?

Mr. BRYANT. I am a little prejudiced because I feel I achieved one of the highest degree of tenant maintenance in a public-housing project that I have seen out on the west coast. I got tenants in public housing to feel the way you have described about cooperative housing. Senator DOUGLAS. You actually got them to cut the grass them selves?

Mr. BRYANT. A great deal more. Plant trees and shrubs. All sorts of improvements in and outside of the home.

Senator DOUGLAS. I notice you develop the necessity of an interest rate not to exceed 3 percent. I take it you studied the proposal, the proposed bill, pretty carefully. You have had some experience in real-estate financing?

Mr. BRYANT. Yes, sir.

Senator DOUGLAS. Do you think that the debentures of the Corporation can be sold in the private market for 2.5 percent so that they will have a half percent reserve for losses and administrative overhead, and so forth?

Mr. BRYANT. If I were an investment banker-I hesitate to say this-it would seem to me such debentures would be a far more attractive security than any single mortgage, because the risk would be spread over a considerable number of projects, so that even if 1 percent of the projects defaulted, the debentures would still be an excellent security, especially since they are guaranteed by the Federal Government.

Senator DOUGLAS. There would be a pooling of risks.

Mr. BRYANT. That is right.

Senator DOUGLAS. And it hasn't been always clear; this corporation would not sell the individual notes or mortgages, to private holders, it would hold those, but merely sell debentures based upon a group of such mortgages? Is'nt that true?

Mr. BRYANT. I feel this is the best possible device for reducing risks in this field. Of course, the problem, the primary problem of reducing risk is sound administration in the first place to see that there is no water in the construction costs, and that is why I have strongly recommended open books on the part of the contractors, and I think that contractors will be found who will be glad to build under those conditions.

Senator DOUGLAS. When you say open books, what do you mean? Mr. BRYANT. That a certified audit be made of the contractor's actual expenses plus a previously agreed overhead and profit fee. Senator DOUGLAS. The cost plus percentage of fixed fee.

Mr. BRYANT. I would call it a cost-minus program. We will say that a unit costs $10,000, and there is an agreed fee of 10 percent, or $1,000; that the unit actually is therefore proposed to cost $9,000, we will say, with open books that anything the contractor saves under that $9,000 there be a prearranged basis for something like 50-50 split. Senator DOUGLAS. Giving him incentive to reduce costs.

Mr. BRYANT. Yes.

Senator DOUGLAS. Instead of possible incentive to increase costs. Mr. BRYANT. That is right.

Senator DOUGLAS. By giving him more than the 10 percent general

contractor's fee.

Mr. BRYANT. Yes.

Senator DOUGLAS. Now, do you know of such contracts that have been let?

Mr. BRYANT. I know of several cooperatives that have drawn up such contracts in anticipation of FHA insurance.

Senator DOUGLAS. Did FHA object to the contract?

Mr. BRYANT. They objected

Senator DOUGLAS. To the idea of cooperatives?

Mr. BRYANT. Yes.

Senator DOUGLAS. This seems to be a very sensible type of contract. I wonder why it hasn't been used more.

Mr. BRYANT. Sensible from the consumer point of view, but not from the speculative point of view.

Senator DOUGLAS. Sensible from a business point of view.

Mr. BRYANT. The market has been so wide open that he hasn't needed to do this until very recently.

The major point that I made before you came in was that in one area there were 1,100 families and only about a third were possibly eligible for low-rental housing; large bulk were regularly employed wage earners, some with two unpaid wage earners in the family, who were just over the limits of public housing. Those people will put up a fight against redevelopment. That is why I feel that until you have some such tool for working with this group, that a large part of your redevelopment may be totally blocked.

Senator DOUGLAS. We are finding the same in Chicago. Families which will be displaced by slum clearance, but who cannot be rehoused in public housing because their income is above the limit.

We have that in Chicago. That is holding up a good deal of slum clearance with us.

Mr. BRYANT. I think that will generally be true in most of the cities studied.

Senator DOUGLAS. Did you see Mr. Foley's cost figures?

Mr. BRYANT. Yes. I feel there was one major error in those figures, in that they understated the savings which could be made, because they used the same Public Housing Administration maintenance and management costs throughout their entire table, whereas the profit margin would be far higher on the private-enterprise housing, and the management costs would be far lower on the cooperative housing, because cooperatives will not need a big central office, with a lot of officials and division heads, and Government accounting procedures, and that sort of thing.

Senator DOUGLAS. Would you be willing to submit a memo on what your experience has been on these items of cost?

Mr. BRYANT. I went into it in individual detail in my testimony. Senator DOUGLAS. Very well.

I regret it is impossible to attend all the committee meetings that one is expected to attend.

Senator SPARKMAN. There is one other item that might be taken into consideration: That is that the turn-over in public housing would normally be greater than in these cooperatives.

Mr. BRYANT. That is an excellent point. There would be far lower turn-over. That, itself, would reduce maintenance costs quite substantially.

Senator SPARKMAN. Of course, we want a greater turn-over in the public housing because we hope to make that a transitory occupancy, and to graduate them to higher incomes.

Mr. BRYANT. I feel I have taken up enough time without going into my feeling on public housing. I would disagree with your statement. Senator SPARKMAN. Going back to the statement about the need for some housing program in connection with redevelopment, you were here yesterday, you may have heard Mr. Lockwood testifying for the National Home Builders Association, make a statement similar to your statement except instead of arguing for cooperative housing, he thought we ought to set up a liberal program under the regular FHA for that type of housing.

You both recognize the need.

Mr. BRYANT. I feel that proposal, however, would really be dangerous in a lot of ways that are alleged this cooperative program would, because you wouldn't have the check of consumers interest in the cost figures for that kind of housing.

That would be another plan for the builders to get 100 to 120 percent financing on the construction without having money in it.

Senator DOUGLAS. As they have been frequently doing under section 608?

Mr. BRYANT. Yes.

Senator SPARKMAN. Are there any further questions?

Senator DOUGLAS. It just occurred to me that you mentioned the fact that you have written a book on cooperative housing which will be published shortly.

Mr. BRYANT. It is a book on redevelopment.